by Andy Masaki – Guest Columnist
If you go by what the economists in United States have to say, then there’s no crisis of US debt as long as the economy keeps gaining. This comes as a pleasant surprise in the face of all the discouragement that the economy has been facing since when. The declaration comes from the representative Paul Ryan who’s the chairman of the House Budget Committee. He’s of the opinion that the US national debt is literally “hurting” the US economy today. However, this is an idea that’s commonly accepted by almost every Republican along with some Democrats as well.
Now, if you’re to go by economic data, be it on housing, investment or even jobs, you’d come to be aware of the fact that it doesn’t really support the claim made by Paul Ryan. Rather his statement comes in the face of economists all over the political spectrum disputing one of the most well-known studies of the subject that shows nations with debt loads greater than 90 percent of their economies grow more slowly.
The recession that drove the United States past the red line literally saw the government slogging to get things on the verge of normalcy, if not more. In fact, it was only after a government spending surge that came in response to this recession that the US 16.7 trillion dollars debt now takes up a 106 percent of the 15.8 trillion dollars worth of economy. Obviously these happen to be key indicators that are a direct reflection of the gathering strength.
There’s good news indeed if you take a look at the increase in business expenditure which is up by 27 percent and that too since the end of 2009. Moreover, there’s also good news if you look at the fact that the rate of annual home construction has gone up by 60 percent literally. Add to that the fact that employers have practically created 6 million jobs.
Borrowing costs are also at record lows and the cost of paying off debt also happens to be comparatively lower than it was previously. The idea of tipping point for debt is now widely accepted as the economic gospel these days. However, it’s also a fact that this is one of the most hotly debated topics amongst economists. Guy LeBas, who’s the chief fixed income strategist at Janney Montgomery Scott LLC in Philadelphia, is of the opinion that the argument about heavy debt loading slowing economic growth doesn’t hold. He believes that it rather suffers from a mix up of cause and effect. With the rise of weak economic conditions, there’s a rise in deficit spending and this is exactly what has led to the increase in US debt. It’s not really the other way round.
There are studies which have found that high debt inevitably chills growth and that too for countries known to print their own currency like the United States itself. You can be sure of the fact that the US economy is expanding though slowly.
Andy Masaki is a financial writer. His articles regularly appear on some of the most prominent financial websites. He loves to write on personal finance topics as well as on current economic issues relevant to the US economy.
